Before we dive into this week’s covered call idea I wanted to address several positions that expired last Friday, and how we will manage those trades …

In the middle of an earnings recession and a slowing economy, defensive stocks are probably the best places to be. These companies can maintain earnings growth while most companies are sliding and remain consistent even as the economy deteriorates further.

Defense is king right now. But defensive stocks are even better when they offer growth as well. In such uncertain times, it makes sense to bank on things that are more certain. Stocks poised in front of a megatrend are the best bet. A megatrend acts as a powerful tailwind for a stock that can make a mediocre pick very good and a good pick great.

In this issue, I highlight a defensive stock that is also one of the world’s largest producers of alternative energy. At the same time, it is also one of the best traditional regulated utilities in the country. It offers defense as well as growth and can thrive in any kind of market.

Last week was quiet, which keeps the overall evidence mostly unchanged—the indexes are hanging in there despite a rash of worrisome news, but there remain plenty of potholes and news- (and rumor-) driven action, including continued selling on strength. The question is whether Q1 reports will bring buyers out of their slumber and launch of bunch of fresh leaders higher. If so (given the hugely bearish sentiment out there), there could be tons of opportunities—but until it happens, it’s best to remain cautious. Once again we’ll leave our Market Monitor at a level 5.

This week’s list has does have a couple of recent earnings winners, and our Top Pick is one of them, gapping to new highs last week and leading what looks like a group move higher.

Stocks are doing a nice job weathering a very choppy earnings season, with mixed – though perhaps better than expected – results coming in from mega caps and the banks thus far. Today, we sidestep U.S. earnings landmines by venturing overseas to add an electric vehicle company that’s a household name in China, but perhaps less well-known here in the States. And it’s starting to give Tesla a run for its money. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We locked in two winning trades this past week bringing our overall win ratio to 86.7% since introducing the service back in late May of last year.

On Wednesday I decided to go ahead and lock in a 13.64% return in our May 19, 2023, IWM iron condor. We were able to lock in over 75% of the original premium sold and with roughly 30 days left until expiration, it just didn’t make sense to hold on to the trade and the associated risk when we could simply lock in a profit and move on to the next opportunity. We were in the trade for 26 days.

We are 26 days away from the May 19, 2023, expiration cycle coming to a close and all five of our positions are in good standing. Moreover, time decay should really start to accelerate over the next two weeks, which should start to give us an opportunity to roll our positions in an attempt to collect more premium. Also, as stated in our webinar last week, I intend on adding two to three new positions over the next two weeks as we work through the heart of earnings season.

*Since we started the Income Trader service back in early June 2022, we’ve brought in a total of 68.37% in income. My hope is that we can step up our gains even further by adding as we progress through 2023.

Forty-two percent of companies that reside in the S&P 500 are due to announce this week. What does this mean for us? Well, trades, trades and more trades.


As we discussed, in great detail, in the trading platform on last Friday’s call, my plan is to focus on MSFT, V, and CAT this week. Of course, as most of us know, things can change quickly. So, as much as I am focused on the three aforementioned stocks heading into the week, there is a chance I might go with a few others or simply add to the already established list for the week. Either way, I expect it to be a fairly busy week of trading, with the possibility of having multiple trades per day.

The market was super slow yet again last week as the indexes were extremely rangebound. The S&P 500 lost 0.05%, the Dow fell 0.3% and the Nasdaq declined by 0.5%. This week earnings season really gets in gear as 44% of the S&P 500 market cap reports.

The market was super slow yet again last week as the indexes were extremely rangebound. The S&P 500 lost 0.05%, the Dow fell 0.3% and the Nasdaq declined by 0.5%. This week earnings season really gets in gear as 44% of the S&P 500 market cap reports.

The market continues to show many small positives, but we’re really looking for a BIG positive to change the market’s character and kick individual growth stocks (many of which are set up well) higher. Until then, many names are subject to potholes, as we saw this week; we trimmed our Shift4 position further and are placing Allegro on Hold.

That said, our general outlook is unchanged--the odds favor the next big move is likely up, but until that happens, we’re playing things cautiously, holding some resilient names, small positions and plenty of cash. Tonight’s issue goes into detail into all our stocks, discusses one reason why the market is so choppy and talks about the hugely negative sentiment out there that could propel the market down the road.

Foreign automakers, including electric vehicle (EV) makers, are losing market share in China as the country doubles down on the EV supply chain.

China makes almost all of EV electric motors and refines most of the chemicals used for lithium batteries. China even leads in developing what could be the next generation of technology, sodium batteries.

In the April issue of Cabot Early Opportunities, we take a quick look at what to expect from portfolio positions set to report in the coming weeks and dive into fresh opportunities that are shaping up nicely now.

At the top of the buy list is a software name we just added to our Watch List last month. We also take a position in a cosmetics stock that looks superb, pull back the curtain on a rising biotech star, tour an enterprise software name based in Canada and revisit a MedTech stock that’s finally getting some respect from the Centers for Medicare and Medicaid Services (CMS).

Enjoy!

There’s been a lot of talk lately about a potential yield curve inversion (happened briefly on Tuesday), so I did some work earlier in the week to see what the data says about small- and large-cap stock performance around inversions.

What a rally off the bottom! After flirting with a severe correction and possibly a bear market, stocks have soared over the past two weeks. The S&P 500 is now down less than 3% YTD. What happened?

Panic waned and investors realized that the economy is still strong, interest rates are still low, and money has no place else to go but stocks to fetch a decent return. The initial panic from the Russia/Ukraine war subsided. Then the Fed hiked rates by a measly 0.25% and pleased short-sighted investors.

After adding IEA to the portfolio after last week’s ratings change, we’re fully invested in our Real Money Portfolio. It’s designed to be 12 holdings of equal initial size. We’re up 4% on the total portfolio we hold now, based on market prices entering today (higher if we tally dividends and trust value of the portfolio’s two SPACs). That puts us in a good spot if Greentech remains on the upswing, since being fully invested in the early stages in a bull move allows us to capture more of the upside. There is resistance ahead, with charts suggesting a move 5% higher and then 12% above current levels will bring in sellers. However, the general stance remains bullish, with our benchmark Wilderhill Clean Energy Index above its uptrending 20-day and 40-day moving averages and little pushback by bears since a high-volume, strong price move earlier this month.

Almost everywhere in the mainstream media and across most Wall Street research firms, there is a common implication that a recession will bring a bear market for stocks.

We’ve been delivered. In just two short weeks the market has gone from a toxic 2022 market sliding toward bear territory to a huge rally that brings back the hope of a mediocre year. Enjoy the high country.

It was ugly two weeks ago. The Russia/Ukraine war was unpredictable and sending ripples through the global economy with soaring food and energy prices. The Fed was a million miles behind the curve in fighting this persistent high inflation.

For more than a year, gold remained stuck in a holding pattern while other metals roared higher in response to global manufacturing demand and supply shortages. All the while, the global economic and geopolitical situation was becoming increasingly tenuous, prompting us to repeatedly wonder when a flight to the safety of gold would transpire.

As market conditions continue to shift, with large-cap U.S. stocks resuming an uptrend in the past two weeks, we are once again making some changes within the tactical Undiscovered Portfolio.

This week’s Friday Update includes our price target increase for one of our energy companies, as well as updates on several recommended companies. We’re not macro-driven, but we are macro-aware, and are thinking about the reserve status of the U.S. dollar. Also, we bid farewell to Ned Johnson, legendary former CEO of Fidelity.

Brazil-based StoneCo (STNE) surged in its first week as an Explorer recommendation, recovering from a sharp sell-off and spurred along by stellar fourth-quarter 2021 financials in which revenue grew by 87% compared to the last quarter of 2020 and the company reported 1.8 million active customers – 2.3 times more than in 2020.

As NATO leaders meet in Brussels and the Russian stock market opens, the Ukraine-Russia conflict continues to send energy and commodities up (see graphic below, courtesy of Bloomberg, as to why). The Euro Stoxx 50 is down 8.7% this year, versus -5.3% for the S&P 500.

The market is looking a lot better than it did a couple of weeks ago even though the Russia-Ukraine conflict continues and the Fed has become more vocal about the need to hike interest rates in order to battle inflation.

What a difference a few days can make. A little over a week ago the market looked like it was about to roll over and die. But since the close on March 14 the S&P 500 has soared more than 8% and the Nasdaq has spiked more than 12%. Will the magnificence last?

I doubt it.

With today’s 9% intra-day price drop following a disappointing near-term outlook, Cisco (CSCO) shares look more attractive and we would buy/add to positions here, as the long-term fundamental picture remains healthy.

The November expiration cycle was a great month for the Cabot Profit Booster portfolio as we will have three positions expire for full profits (IGT, BLDR, DDOG), while one is at a profit though it may not reach its peak potential (MRO). More on that below

This Virginia utility beat analysts’ earnings estimates by $0.07 last quarter. The shares have a current dividend yield of 2.41%, paid quarterly.

Shares of DLocal (DLO) are getting hammered today (-20%, roughly) after the company released formal Q3 results. Recall, preliminary results were released in October at the time of the secondary offering (priced at 52.25, versus stock at roughly 37 mid-day today).

A Republican representative has proposed new legislation to deschedule cannabis (making it less restrictive), which has given the cannabis stocks some momentum.

We’re up 160% on our Excelsior portfolio’s Navitas Semiconductor warrants (NVTS.WS) today. At a recent price of 6.70, the warrants are trading for more than their maximum fair value and we recommend selling most of the position today.

A Republican representative has proposed new legislation to deschedule cannabis (making it less restrictive), which has given the cannabis stocks some momentum.

The major indexes are starting off the week on a decent note—as of 10:15 am EST, the Dow is up 74 points and the Nasdaq is up 3 points. But growth stocks are lagging, and some names are cracking near term.

Analysts expect this cable company to grow its earnings at a 37.09% annually, over the next five years.

I’ve decided to cut bait with Accolade (ACCD) since the stock just dribbled below its October low. This is another case where a healthcare tech stock just can’t seem to maintain enough momentum to keep investors engaged, despite the relatively steady financial performance and seemingly bright future.

SELL: AVTR and TIXT. Moving to HOLD: APP

Analysts expect this cable company to grow its earnings at a 37.09% annually, over the next five years.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.